Cloud Storage Booming, But Trouble is on the Horizon

No matter how you slice it, there's only a finite number of people and companies that will put their data in the public cloud, but that hasn't stopped the competition -- for a free service, no less! -- from turning cutthroat. But the market could be in trouble if the same standards that brought down Megaupload are applied, or if providers continue to abuse users' trust. Over the past few days, two industry heavyweights have tossed their hats in the online storage ring. 

Microsoft's SkyDrive came first, with 7GB of free storage, tight integration with Office Web Apps, and promised (but not yet delivered) Windows 8 Metro support. The next day, Google announced its long-anticipated Google Drive, improving upon Google Docs with 5GB of free storage and tight integration with Google Apps. Microsoft and Google, by blessing and massively publicizing the concept, will certainly convert some hesitant users and businesses to the public cloud storage faith, but they'll hardly have the field to themselves. Pick your favorite online storage approach -- iCloud, SkyDrive, Google Drive, Cloud Drive (from Amazon), Dropbox, Box, SugarSync, SpiderOak -- and you can find at least three online reviews right now that will agree with your choice. I guess that's what makes a horse race.

The cloud storage concept isn't new: Google's had online "drive" storage with G-drive since 2004. Dropbox and an early incarnation of SkyDrive (then known as Windows Live Folders) started in 2007. Google Docs has been viable since 2010. But we've never seen a marketing push like the one that's just hit. I don't think Box (formerly Box.net), SugarSync, or SpiderOak are going to collapse any time soon. Each has a unique niche. SpiderOak encrypts data and doesn't keep the key. Box wants to take on SharePoint in the enterprise, with online workspaces and content management. SugarSync works on all things mobile -- even Symbian, for heaven's sake -- and sports a large number of features none of the others can touch. That said, it's hard for me to envision big growth spurts for any of those three, and some consolidation seems likely. Dropbox has a lot of useful third party apps, but its advantage isn't going to hold water for too long since all those third parties are working non-stop to tie into Google Drive and SkyDrive.

Cloud Drive needs a massive facelift -- and a good ad campaign -- if it wants to compete as a standalone cloud storage repository. Right now its only real claim to fame is the integration with Amazon's books and music storage, and the Kindle connection. But then again, Amazon may just want to sit this one out, content with servicing Kindle customers. That leaves iCloud, and I don't see anything but positive fallout for Apple. iCloud has set itself above the fray, with a clearly superior service in many ways. If you don't want to think of it as superior, you can think of it as better integrated with all of Apple's products. And since demand for The Apple Way has never been stronger, iCloud can pretty much ride it all out, looking down at the hoi polloi from afar. But trouble could be brewing for many cloud storage providers.

The file upload/hosting business was dealt a crushing blow when the U.S. Justice Department shut Megaupload's servers in Hong Kong in January, and had founder Kim Dotcom arrested in New Zealand. The Megaupload team had created an entire ecosystem facilitating the violation of U.S. copyright laws, but the technological heart of the operation hinged around a user's ability to upload copyrighted material, retrieve an URL that pointed directly to that material, and then distribute (or sell) that URL to anyone. As of today, SkyDrive, Google Drive, Dropbox, Box, and SugarSync have the same feature: They make it very easy to upload a file and generate an URL that points to that file alone. Uploader can then send the URL to anyone they wish, in some cases with an optional password, and the recipients can download the file without signing up for an account, without logging in. SpiderOak has a similar capability, called ShareRooms, that works with folders.

If Megaupload's transgressions were so egregious they warranted international police action, what standards apply to these other cloud storage companies? There's hardly a hair's-breadth of distance between cloud storage and file sharing. Will Microsoft, Google, Dropbox, Box, SugarSync, and SpiderOak be required to scan incoming files for copyright violations? Will they have to implement a Content ID system, similar to YouTube's? If so, Google -- which invented Content ID -- has a big leg up on its competitors. In the end, it seems to me that the battle for online storage will be less about features and more about trust. Google's raised a hornet's nest of privacy conerns this week over its ridiculous Google Drive terms of service, then compounded the damage by not immediately responding, "We screwed up, we'll change it." Dropbox blew it last year with privacy concerns that haven't been solved -- at least, not in a technical way. Of all the data storage companies I've mentioned here, only SpiderOak says that it can't look at your stored data. They don't keep the keys. All of the others have ways -- carefully controlled, logged, audited ways -- of looking at your data. So... whom do you trust? Or do you encrypt your data before sending it to the cloud?